Owing private jets makes a lot of sense for Walmart, shuttling teams of middle managers between stores in far flung and remote locations efficiently. However the private jet industry has seemed ripe for disruption for a long time, though a lot of companies have burned a lot of cash trying unsuccessfully to find a way to do it.
There was the original model of fractional ownership dating to 1987, prepurchasing time on fleets of private jets. But even there private planes were flying around a lot empty, pre-positioning for booked trips. And planes were sitting, too. While expensive to operate (depreciation, fuel, crew) a plane doesn’t make money sitting on the ground.
Airbnb started by monetizing the unused time of your most expensive asset, your home, before it grew to individuals becoming their own small hotel operators. Uber started by monetizing the unused time of your second most expensive asset, your car, along with excess personal time (before people started buying cars and financing them through Uber, making it their full time job).
Several startups have tried to monetize unused and underutilized private jet time. There’s even been consolidation in the industry. It hasn’t quite jelled yet. There have certainly been disputes as companies like JetSmarter have moved from being impossibly generous to reneging on past promises to customers who had prepaid for services.
My own view is not to trust any of these offerings, but take advantage of short terms offers while they’re available. I loved getting free private jet flights from JetSmarter because I was an American Airlines Executive Platinum.
The companies have reached a definitive agreement for Delta Private Jets, a wholly owned subsidiary of Delta, to combine with Wheels Up. The transaction will pair Wheels Up’s membership programs, innovative digital platform and world-class lifestyle experiences with Delta Private Jets’ renowned reliability, safety, service and scale. When the transaction closes, Wheels Up will have a fleet of more than 190 private aircraft and over 8,000 members and customers. Delta will also hold an equity position in Wheels Up.
It sounds like the Delta Private Jets operation will move over to Wheels Up, as the latter is “committed to providing ongoing career opportunities for Delta Private Jets employees.”
Wheels Up provides access to empty legs, shared flights, and guaranteed availability with 24 hours’ notice on a pay by the hour basis. This deal should give them access to Delta customers, hopefully positioning them to provide ‘last mile solutions’ taking customers from their final commercial airport to smaller destinations.
What we can assume is that Delta is getting a sweetheart deal, will have a say in how the company is run, but will provide enough heft to Wheels Up that could push the company over the line to become the winner in the space or at least a solid long-term viable competitor.
And what this says about Delta is that they are taking the cash being spun off of their U.S. operation – which is mature and has limited opportunity for growth – and using it to invest in potentially higher growth areas, the way they’ve invested in airlines around the world. That’s a departure from competitors who are shocked by their low valuation multiples and do little about it, resigning themselves to low growth futures.
Don’t expect any Delta Medallion elite upgrades to private jets though. Delta quietly eliminated that program and never actually delivered on the upgrades they loudly promised anyway.